Insitute for Justice Releases Update to Study on Small Businesses in Chicago

How to Create More Jobs in Chicago: New Study Shows Key Is to Remove Local Red Tape

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Institute for Justice Press Release

October 26, 2010

So many Chicagoans are out of work. So why do Chicago and Illinois laws continue to make it so difficult for people to start a business that creates jobs? And why do they make job creation hardest for the very people who need these opportunities the most—the poor?

A newly revised report released today shows how Illinois and Chicago stifle the dreams of real-life entrepreneurs by making it nearly impossible to start even a simple business. The report, called “Regulatory Field Home of Chicago Laws: Burdensome Laws Strike out Chicago Entrepreneurs,” tells the stories of entrepreneurs like Charles Ashton, who was stopped by police for selling flowers outdoors, and Julia Samuels, who may have to shut down her pedi-cab business if the city bans them during rush hour, and Joshua Leith, who decided not to start a moving company when he realized he would have to pay a high fee and plead his case in front of a judge just to get permission to serve his first customer.

The Chicago study was written by the director and former assistant director of the Institute for Justice Clinic on Entrepreneurship at the University of Chicago Law School, which assists low-income entrepreneurs trying to build businesses in Chicago’s inner city. The IJ Clinic first released its report in May 2009, telling stories of IJ Clinic clients and other entrepreneurs who had to wrestle with local government just to get permission to earn an honest living. The initial response to the report was overwhelming. Many legislators and government officials expressed support for freeing entrepreneurs, and some took action to reform particularly egregious laws.

The new edition of the report details some of the reform efforts during the past year and shows how efforts to address the problems exposed by our study often created new problems. For example, Chicago eased up on some children’s play centers but increased requirements for others. Illinois exempted hairbraiders from cosmetology licensing requirements but still requires hundreds of hours of needless schooling for certification. The study also contains entirely new sections describing complex, burdensome laws that cover building inspections, hanging a business sign, operating bicycle taxis and opening a home-based day care.

IJ Clinic Director Elizabeth Milnikel, one author of the Chicago study, said, “Chicago is a city of neighborhoods, and Chicago’s neighborhoods depend on local businesses. If the city and the state continue to block creative, courageous entrepreneurs, then our neighborhoods will fall apart. So many neighborhoods are already desperate for jobs and businesses. Those jobs won’t be created until the government gets out of the way of those who want to make positive changes by creating businesses.”

Along with the newly revised Chicago study, the Institute for Justice, a national public interest law firm that fights for economic liberty, released studies examining barriers to honest enterprise in cities across the nation, detailing how local governments are blocking business everywhere.

The report recommends:

Chicagoans should no longer have to beg for an alderman’s permission to rehab a storefront or to hang a sign. Chicago should be ruled by a “rule of law,” where once individuals meet objective and well-established requirements, they should be free to pursue their occupation, rehab their building and communicate truthfully with potential customers. What Chicago has now is a “rule of men,” where aldermen can arbitrarily wield their power and block their constituents’ pursuit of an honest living.

The city should eliminate all but health-and safety-specific education requirements for barbers, braiders and nail techs. The city should also cancel continuing education requirements for these trades and allow customers—rather than a panel of insiders—to decide who is qualified to pursue these occupations.

The city and the state should eliminate so-called “titling acts” and allow entrepreneurs to truthfully tell others what they do for a living. Right now, government regulations ban landscape architects, interior designers and engineers from using those titles unless they first get the government’s blessing. Such anti-competitive restrictions are put in place at the behest of industry lobbyists who want to use government force to keep out competition.

Illinois must overhaul its law licensing household goods movers so nothing more is required to get into business than registration with the state and providing proof of insurance. The state should no longer require companies to demonstrate that they won’t compete with existing service providers—a requirement that helps only existing businesses while harming consumers and would-be entrepreneurs. Furthermore, consumers—and not the government—can best decide if a business is “necessary.”

Entrepreneurs (like home repair people, florists and taxi drivers) who use vehicles to serve customers should be allowed to park on the streets of Chicago. They are banned from doing so.

Illinois should make it easier for individuals to start limited liability companies by no longer tripling the filing fees for these legal formations compared to corporations.

IJ’s eight reports document how irrational and anti-competitive regulations block entrepreneurship. More often than not, these government-imposed restrictions on economic liberty are put in place at the behest of existing businesses that are not shy about using government force to keep out competition. The Institute for Justice’s other city studies examine regulations imposed on a wide range of occupations in Houston, Los Angeles, Miami, Milwaukee, Newark, Philadelphia and Washington, D.C.

“At a time when our nation has lost millions of jobs, the Institute for Justice has identified specific regulations in specific cities that, if removed, would result in greater opportunity and greater employment in these cities,” said IJ Senior Attorney Dana Berliner, who edited the reports. “These are the kinds of reforms we’d love to see pursued not only in the cities we feature, but replicated across the nation. Americans are crying out for limited government and greater economic opportunity. Implementing the reforms we urge in these reports is a cost-free way to achieve both.”